MANAGEMENT ACCOUNTING CHANGE IN A PRIVATISED

A PROCESS MODEL OF MANAGEMENT ACCOUNTING CHANGE BASED ON THE
INSTITUIONAL THEORY CONTRIBUTIONS
Cláudio de Araújo Wanderley
PhD em Contabilidade
PPGCC – Programa de Pós-Graduação, Mestrado em Ciências Contábeis da UFPE
Av. dos Funcionários, s/n – 1º andar, sala E-6.1, Recife/PE – Brasil
[email protected] ou [email protected]
Tel. +55 8121268911
ABSTRACT
This paper aims to theorise the complexities of the process of management accounting change
from an institutional perspective. Institutional theory has been widely used to study management
accounting change. However, the institutional literature on management accounting change is
fragmented and disjointed, providing an unstructured picture of dynamics and outcomes of the
process of management accounting change. This situation makes the task of explaining the
complexity of management accounting change extremely difficult. In this paper we argue that the
complexity of management accounting change comprises four key elements: the internal and
external pressures for change and the interplay between them; the role of agency; the idiosyncratic
internal elements; and the process of institutionalisation. Drawing on institutional theory and these
four elements of management accounting change, we developed an integrated framework that is able
to capture and examine the macro and micro level dynamics in management accounting change.
Keywords: Management accounting change; Institutional theory; theorization; accounting.
Área temática do evento: Controladoria e Contabilidade Gerencial (CCG).
1 INTRODUCTION
The issue of management accounting change has been the subject of a number of studies over
the past decade (Berry, et al., 2009; Parker, 2012). Institutional theory has been the dominant
theoretical perspective adopted in these studies (Scapens and Bromwich, 2010). In particular, new
institutional sociology (NIS) and old institutional economics (OIE) have been prominent in
extending the study of management accounting and its change towards the inclusion of social and
institutional dimensions of organisations and their environment (Jarvenpaa, 2009; Modell and
Wiesel, 2008). However, although the institutional research on management accounting change has
provided a comprehensive understanding of the process of management accounting change, research
on management accounting change based on this approach is fragmented and disjointed, providing
an unstructured picture of dynamics and outcomes of the process of management accounting change.
As a consequence, the interpretative institutional research based on case studies has not yet fully
provided the so-called theoretical generalisation (Scapens, 1990). This can jeopardise the
interpretative nature of the explanation of the process of management accounting change based on
the pattern model. This model adopts a holistic approach in which the relationships between various
parts of the system and the system’s own relationship with its context serve to explain the system
(Scapens, 2004). Therefore, we suggest that it is paramount to identify and summarise the key
1
elements of the process of management accounting change to support the difficult task of theorising
the complexity of this process in an organisation.
Our starting point in this paper is Scapens’ (2006) analysis of the core elements of the process
of management accounting change. Scapens (2006, p. 27) states that: “It is this complex ‘mish-mash’
of inter-related influences which shapes management accounting practices and explains the diversity
we see in the practices of individual companies”. We propose that this complexity of influences in
the process of management accounting change encapsulates four elements: (1) the internal and
external pressures for change and the interplay between them; (2) the role of agency; (3) the
idiosyncratic internal elements of the process of change; and (4) the process of institutionalisation
in itself. Therefore, we argue that to fully explain and understand the process of management
accounting change in an organisation, it is necessary to study and explain these four elements and
their interaction.
We have formulated the following research question: Do these four elements fully summarise
and explain the complexities of management accounting change in an organisation?
The remainder of the paper is organised into three main sections. First, we explain the
institutional understanding of management accounting change by focusing on the four key elements
of change: the internal and external pressures for change and the interplay between them; the role of
agency; the idiosyncratic internal elements; and the process of institutionalisation. After this, we
propose a process model to study management accounting change in an organization. Then, the final
section provides concluding comments.
2 UNDERSTANDING MANAGEMENT ACCOUNTING CHANGE
The issues regarding the relevance, nature and roles of management accounting systems within
organisations have been debated by researchers and management accountants over the past 25 years.
This debate has intensified due to the major transformations in the organisational environment which
have taken place in the last few decades (Marginson and Ogden, 2005). Nowadays, organisations
face an uncertain business environment with increasing market competition. As a result,
organisational resources and processes have to be organised and monitored to achieve organisational
goals. In order to achieve this, management accounting systems play an essential role because they
provide information for the decision-making process.
In the late 1980s, the discussion about the process of management accounting change within
the broad organisational context became a popular topic of debate among management accounting
researchers, in particular after ‘Relevance Lost: the Rise and Fall of Management Accounting’
Johnson and Kaplan’s book in 1987. As mentioned previously, Johnson and Kaplan (1987)
questioned the relevance of contemporary management accounting practices. The main argument
was that management accounting did not follow the fast development of the organisational
environment. In other words, there has not been sufficient change in management accounting
techniques to match the changes in the organisational environment, and to support the growing
demand for information. Johnson and Kaplan (1987) stated that in general, companies opted for
internal information systems which were mainly designed to meet the requirements of external
financial reports. For this reason they called for the development and implementation of new
‘advanced’ management accounting techniques.
Since then, new ‘advanced’ techniques have been developed and introduced in the
management field. The principal management accounting techniques introduced in 1990’s were:
activity-based costing (ABC); activity-based management (ABM); life cycle costing; target costing;
quality costing; functional cost analysis; throughput accounting, strategic management accounting;
2
shareholder value techniques; economic value added (EVA); the balanced scorecard (BSC); and
supply chain management (SCM) (Ax and Bjornenak, 2007).
The debate over the changing nature of management accounting has been supported by a
wide array of research, whose findings are not uniform and, sometimes, contradictory (Burns, et al.,
1999; Burns, et al., 2003; Busco, 2006). On the one hand, management accounting change can be
understood as the introduction of new management accounting techniques, such as ABC or the BSC.
This particular view is largely supported by North American accounting scholars (Lukka, 2007). On
the other hand, management accounting change can be understood as the process of change in the
manner in which traditional and/or new techniques are actually being used. Therefore, management
accounting change occurs with the creation and introduction of new techniques or with changes in
the way managers use management accounting information generated by traditional systems.
The main argument of this paper is that in order to be able to theorise and explain
management accounting change the key four elements of change (the internal and external pressures
for change and the interplay between them; the role of agency; the idiosyncratic internal elements;
and the process of institutionalisation) must be explained in an integrated way, as they are
interrelated and interconnected. As a consequence, we argue that the process of management
accounting change starting from the view that the interplay between internal and external pressures
for change is materialised in terms of criteria and practices at the three levels of social-historical
relationships, namely the economic and political level (PE), the organisational field level (OF), and
the intra-organisational level (OL) (Dillard, et al., 2004). These criteria and practices are the result
of the structures (legitimation, signification and domination) in place at these three levels. The
changes on these structures over time will generate institutional contradictions, which will trigger
human agency (praxis) to introduce change into the organisation. The introduced practice will be
shaped by the so-called idiosyncratic internal elements, which will also influence the process of
institutionalisation of this new practice. Then, we move on to explain in detail the four key elements
of management accounting change.
2.1 The internal and external pressures for change and the interplay between them
Management accounting change has many reasons or drivers for change (Innes and Mitchell,
1990; Scapens, et al., 2003; Yazdifar and Tsamenyi, 2005). Change can occur as a response to
external sources, such as market pressures, government laws, consumer expectations, technology,
social and political change or internal pressures, such as a change in the power dynamics of the
organisation, a change in dealing with a process or behaviour problem, or a change in the size and
complexity of the organisation (Carruthers, 1995; Greenwood and Hinings, 1996). As a
consequence, institutional change is not only seen as arising out of pressures from an organization’s
external environment, but also from the actions of organisational actors (Greenwood, et al., 2010;
Tracey, et al., 2011). It is the interaction of the external and internal pressures that shape the process
of management accounting change (Busco, et al., 2007; Dillard, et al., 2004; Hopper and Major,
2007; Moll and Hoque, 2011; Scapens, 2006; Tsamenyi, et al., 2006). As a result, this interplay
between internal and external pressures must be considered as a key element to understand and
explain management accounting change in an organisation.
Although, the literature on accounting change has identified that the interplay between the
external and internal pressures is paramount to understanding change, the extant literature typically
poses the emphasis on the dichotomy between exogenous and endogenous factors affecting change
(Liguori, 2012). In order to overcome this situation, some authors have extended the Burns and
Scapens (2000) framework by incorporating the external environment and explaining the interaction
3
between internal and external factors for change (Busco, et al., 2006; Busco and Scapens, 2011; NorAziah and Scapens, 2007; Ribeiro and Scapens, 2006; Yazdifar, et al., 2008). Although, these studies
have provided a valuable contribution for the management accounting change field, they focus on
only one aspect of the process of change, such as trust (Busco, et al., 2006; Nor-Aziah and Scapens,
2007), culture (Busco and Scapens, 2011), and power and politics (Ribeiro and Scapens, 2006;
Yazdifar, et al., 2008). In addition, these studies do not fully theoretically articulate how the criteria
and practices at the inter-organisational and intra-organisational levels are linked.
In order to theorise the interplay between external and internal organisational factors in the
process of change, the Dillard et al.’s (2004) model is particularly useful. Dillard et al. (2004)
advocate that the process of institutionalisation moves in a recursively cascading manner through
three levels of socio-historical relationships, namely economic and political level (PE),
organisational field level (OF), and Organisational level. Dillard et al.’s framework is supported by
the concept of ‘axes of tension’ proposed by Weber (1958; 1961; 1968) and insights from
structuration theory, in particular three structural type concepts, namely: ‘signification’,
‘legitimation’, and ‘domination’ (Giddens, 1976; 1979; 1984) to indicate how criteria and practice
are linked over the three of the social system. This theoretical conceptualisation gives support for
theorising and explaining how the external and internal pressures are interlinked and how they shape
the process of management accounting change.
2.2 The Role of Agency
Agency is the actions taken by individual members or agents of a social system in time-space
(Giddens, 1984). Agency is a central issue in the process of change (Englund and Gerdin, 2011;
Englund, et al., 2011). Busco et al. (2007) consider this issue as one of the key dimension of the
research in management accounting change. The importance of this issue has been acknowledged
by the academic community and, in later contributions, researchers have been more interested in the
actors’ agency in the institutionalised world (Lounsbury, 2008). The role of agency in the process of
change is a particular challenge for the institutional theory, because of the problem with embedded
agency, i.e. the difficulty of explaining how change occurs in institutionalized organisations
(Johansson and Siverbo, 2009).
The difficulty in explaining change is due to the fact that institutional theory argues that
social and economic action is governed, enabled and constrained by widely shared regulative,
normative and cultural-cognitive norms, creating stability and similarity (van Dijk, et al., 2011).
However, research has shifted attention from the stabilising effects of institutions to agency and
institutional change, by investigating strategic responses to institutional pressures (Oliver, 1991),
institutional entrepreneurship (DiMaggio, 1988) and institutional work (Kaghan and Lounsbury,
2011; Lawrence, et al., 2009). Among these approaches institutional entrepreneurship has been
increasingly adopted by academic scholars to explain how actors can contribute to changing
institutions despite pressures towards stability and inertia (Battilana, et al., 2009; Greenwood and
Suddaby, 2006; Hyvönen, et al., 2012; Lounsbury and Crumley, 2007; Sharma, et al., 2010; Tracey,
et al., 2011).
The concept of institutional entrepreneurship refers to the actions of “actors who have an
interest in particular institutional arrangements and who leverage resources to create new institutions
or to transform existing ones” (Maguire, et al., 2004, p. 657). Individuals, organisations and
collectives have been pointed out as examples of actors who can act as institutional entrepreneurs.
However, not all actors appear to be equally motivated to initiate change. Battilana, et al. (2009)
highlight that the actors’ willingness to exert agency depends on two conditions: (a) field
4
characteristics (i.e. mature field or emerging field), and (b) actors’ social position (i.e. dominant or
marginal). Although these are important characteristics to analyse agency and institutional
entrepreneurship, it is the accumulation of institutional contradictions that enables agency to
introduce change as institutional fields are comprised of multiple logics and structures that often
overlap and conflict (Greenwood, et al., 2010; Hyvönen, et al., 2009; Lok, 2010; Lounsbury, 2007;
Wagner, et al., 2011). Such heterogeneity is likely to give rise to institutional incompatibilities that
become a source of internal contradiction, which can be defined as “a pair of features that together
produce an unstable tension in a given system” (Battilana, et al., 2009, p. 75). The accumulation
institutional contradiction is likely to trigger actors’ reflective capacity, enabling them to take some
critical distance from existing institutional arrangements, to propose new forms of acting and
organising, and to mobilise others in relation to their projects and ideas (Greenwood and Suddaby,
2006; Seo and Creed, 2002).
The Seo and Creed (2002) provide a consistent framework to theorise the role of agency in
the process of change. A number of authors (Abrahamsson and Gerdin, 2006; Burns and
Baldvinsdottir, 2005; Burns and Nielsen, 2006; Hopper and Major, 2007; Sharma, et al., 2010) have
used the Seo and Creed’s (2002) framework to explain the process of institutional change in the
management accounting field. The main pillar of the Seo and Creed (2002) framework is the view
that institutional change should be understood as an outcome of the dynamic interactions between
institutional contradictions and human praxis. The concept of contradictions is key to Seo and
Creed’s (2002) framework, because it can explain when, how and why institutionally embedded
agents might come to challenge, and subsequently attempt to change their and other’s taken-forgranted beliefs and ways (Burns and Baldvinsdottir, 2005). Seo and Creed (2002) identified four
sources of contradiction: technical inefficiency, nonadaptability, institutional incompatibilities, and
misaligned interests.
First, isomorphic conformance to the prevailing institutional arrangements to obtain
legitimacy might be at the expense of technical efficiency. A number of authors highlight that
conformity to institutional arrangements may conflict with technical activities and efficiency
demands (Meyer and Rowan, 1977; Powell and DiMaggio, 1991). The possibility of loose coupling
can lead to a discrepancy between the functional/technical requirements of the company and
institutional requirements. This possible discrepancy can be a source of institutional contradictions.
Second, contradictions can arise from non-adaptability to the external environment.
According to Burns and Baldvinsdottir (2005) once institutions are in place, they tend to be selfenforcing and taken-for-granted. As a result, there is little or no response to shifts in external factors
due to psychological and economic lock-in towards (internal) institutional arrangements. Seo and
Creed (2002, p. 228) summarise this source of contradiction by stating that “although
institutionalization is an adaptive process, once in place, institutions are likely to be both
psychologically and economically locked in and, in a sense, isolated from unresponsive to changes
in their external environments”.
The third source of contradiction is related to intra-institutional conformity that creates interinstitutional incompatibilities. In other words, conformity to specific institutional arrangements often
leads to conflict with alternative institutions. Seo and Creed (2002) emphasise that individuals and
organisations are increasingly exposed to multiple and contradictory, yet interconnected,
institutional arrangements. As a consequence, an organisation or individual that conforms to
particular embedded institutional arrangements might be incongruent to other institutional settings
and different time-space circumstances (Burns and Baldvinsdottir, 2005).
5
Finally, the fourth source of contradiction is due to political struggles among various
participants who have divergent interests and asymmetric power (Seo and Creed, 2002). Seo and
Creed (2002) point out that actors whose ideas and interests are not adequately served by the existing
social arrangements can act as potential change agents who, in some circumstances, become
conscious of the institutional conditions. Therefore, contradiction can emerge due to misalignment
between institutionalised ways and the divergent perceived interests of actors embedded in such
ways (Burns and Nielsen, 2006).
Institutional contradictions are the essential driving forces of institutional change, but human
praxis is a necessary mediating mechanism between institutional contradictions and institutional
change. Praxis defines human agency of a political nature which, though embedded in existing
institutions, attempts to influence and secure change in the institutional configuration (Burns and
Nielsen, 2006). This definition is similar to the one of institutional entrepreneur. In the same vein as
Greenwood and Suddaby (2006), we understand that human praxis and institutional entrepreneurship
are similar concepts. According to Seo and Creed (2002, p. 230) praxis has three component parts:
(1) actors’ self-awareness or critical understanding of the existing social conditions, and how these
social conditions do not meet actors’ needs and interests; (2) actors’ mobilisation, rooted in new
collective understandings of the institutional arrangements and themselves; and (3) “actors’
multilateral or collective action to reconstruct the existing social arrangements and themselves”.
2.3 The idiosyncratic internal elements of the process of change
The idiosyncratic internal elements of the process of change are the items that make up the
intra-organisational dynamics. The management accounting change literature has provided many
examples of factors that make up the intra-organisational dynamics, such as power (Burns, 2000;
Coad and Herbert, 2009; Jacobs, 2009; Kholeif, et al., 2007; Tsamenyi, et al., 2006), trust (Busco,
et al., 2006; Johansson and Baldvinsdottir, 2003; Nor-Aziah and Scapens, 2007; Seal, et al., 2004),
politics (Burns, 2000; Yazdifar, et al., 2008) and organisational culture (Busco and Scapens, 2011;
Jansen, 2011; Moll and Hoque, 2011; Yazdifar, et al., 2008).
The literature on organisational and accounting change has provided substantial evidence
that in order to understand and explain change it is necessary to examine the organisational
interpretation of the social, political and economic contexts and intra-organisational dynamics
(Schreyögg and Sydow, 2011; Steen, 2011; Thomas, et al., 2011). The management accounting
literature shows the intra-organisational dynamics and its implications at various hierarchical levels
of an organisation play an important role in the process of management accounting change (Burns,
2000; Tsamenyi, et al., 2006; Yazdifar, et al., 2005).
Organisations are open to the external environment and influenced by external pressures, but
organisations’ responses to external forces and expectations are no longer assumed to be invariably
passive and conforming across all institutional conditions (Greenwood, et al., 2010; Hardy and
Maguire, 2008; Oliver, 1991). How organisations respond to external pressures, becomes a function
of intra-organisational dynamics (Greenwood and Hinings, 1996; Ma and Tayles, 2009).
In order to theorise the influence of the idiosyncratic elements on the process of management
accounting change, Greenwood and Hinings (1996) provide a strong framework. This study provides
a systematic view and a typology of the idiosyncratic elements of the process of change. Their ideas
have been used extensively by the institutional organisational change literature (e.g. Greenwood and
Suddaby, 2006; Pache and Santos, 2010), as well as, by the management accounting change literature
(e.g. Liguori and Steccolini, 2012; Ma and Tayles, 2009).
6
Greenwood and Hinings (1996) identified four main intra-organisational factors that can
create institutional contradiction and influence the process of change. These factors are: (a) the
interests of those affected by change - groups seek to translate their interests into favourable
allocation of scarce and valued organisational resource; (b) value commitments, which are the values
that are generally the prevailing conceptions of what a company should be doing, of how it should
be doing it and of how it should be judged (Liguori and Steccolini, 2012); (c) the power dependencies
which is the power of particular groups to influence the process of change; and (d) the capacity for
action, which is determined by a combination of technical and managerial capacities (Greenwood
and Hinings, 1996; Liguori and Steccolini, 2012). Greenwood and Hinings (1996) view these four
elements as the filters of the external pressures for change acting as change precipitators and/or
mobilises. As a consequence, the idiosyncratic internal elements can trigger change and influence
the process of institutionalisation.
2.4 The Process of Institutionalisation
Institutionalisation refers to both the implementation and internalisation of new practices
(Dambrin, et al., 2007). By analysing the process of institutionalisation, we seek to explain how new
practices became accepted and take root as values and beliefs in an organisation. We draw on Burns
and Scapens (2000) framework to explain the process of institutionalisation of new management
accounting practices at the intra-organisational level. Scapens (2006) states that routinisation and
institutionalisation are at the heart of the Burns and Scapens (2000) framework. Their framework
has been widely adopted to explain management accounting change, in particular, the process of
institutionalisation of new practices (e.g. Burns and Quinn, 2011; Guerreiro, et al., 2006; Herbert
and Seal, 2012; Lukka, 2007; Nor-Aziah and Scapens, 2007; Soin, et al., 2002; Yazdifar, et al.,
2008).
According to the Burns and Scapens (2000) framework, the process of institutionalisation
follows four stages. The first step concerns the ‘encoding’ of the existing institution and taken-forgranted assumptions and meanings into the new rules, routines and procedures which embody
organisational values, such as management accounting practices. The second process refers to the
‘enactment’, through the day-to-day activities performed by organisational actors, of the routines
and rules which encode the institutional principles. The third process represents the ‘reproduction’
of the rules and routines over time, through their repeated use in practice. The last step refers to
‘institutionalisation’ of routines and rules which have been reproduced through behaviour of the
individual actors.
In sum, the process of institutionalisation can be described as a process in which rules and
routines are first encoded within the underlying assumptions that condition how people behave and
then enacted by organisational members and gradually reproduced through their everyday actions,
ultimately being institutionalised, that is, taken-for-granted by the majority of the organisational
actors (Burns and Scapens, 2000).
3 A PROCESS MODEL OF MANAGEMENT ACCOUNTING CHANGE
Smets, et al. (2012) have identified three existing approaches to analyse institutional change,
which emphasise differences in the origin, mechanism, and unfolding of change. The first approach
depicts institutional change as resulting from exogenous shocks, such as shifts in social values,
regulatory policies, or technological regimes. The second stream focuses on the triggering role of
endogenous organisational field-level contradictions. It is argued that organisations at the interstices
of these contradictions become able to consider different responses to institutional pressures, and to
7
initiate change. The third approach focuses on the role of the intra-organisational dynamics, that is,
the notion that organisational responses to institutional pressures are conditioned by intraorganisational interests and values. These three approaches have collectively provided important
insights into why, where, and how change in institutional logics and their associated organisational
arrangements might occur.
The literature on institutional theory and accounting change has also benefitted from these
general studies on institutional change. In this paper, we draw on Scapens (2006) to provide a broad
picture of the institutional understanding on the process of management accounting change and to
identify the core elements to explain this process. Scapens (2006) reviews the utilization of the
institutional theory, in particular the Burns and Scapens (2000) framework, in the study of
management accounting change. In his paper, Scapens (2006) shows the importance of the process
of institutionalisation (routinisation) to understand management accounting change. In addition, he
explains why the interplay of external and internal pressures, the role of agency, and issue of trust
and power are primordial aspects to consider in order to make sense of the process of management
accounting change in an organisation. Scapens (2006, p.27) concludes:
“At one level there are broad systematic pressures shaping management accounting
practices (...) But in addition to these external pressures, there are internal pressures
for and constraints on management accounting practices. Management accounting
change in organisations has to be seen as an evolutionary, path dependent process in
which existing ways of thinking (institutions), circuits of power and trust in
accountants can all have an impact on the way in which the actors within the
organisation respond to external institutional and economic pressures.”
Based on Scapens’ (2006), we propose that the core elements involved in the process of
management accounting change are: (1) the interplay of internal and external pressures; (2) agency;
(3) the idiosyncratic internal elements of change; and (4) the process of institutionalization (see
section 2). The interplay of internal and external pressures, the role of agency, and the process of
institutionalisation are explicitly presented by Scapens (2006) as key elements to understand
management accounting change. In our paper, we create the label ‘the idiosyncratic internal elements
of change’ to aggregate all factors that make up the intra-organisational dynamics and might
influence the process of change, such as the previous institutions, power, and trust as highlighted by
Scapens (2006), and other factors presented in the institutional literature such as, politics (Burns,
2000), organisational culture (Busco and Scapens, 2011), and capacity for action (Greenwood and
Hinings, 1996).
The recent literature on accounting change that draw on institutional theory, i.e. after the
Scapens (2006) paper, continues to discuss these four issues on change, which reinforces our
conclusion that these four elements taken together are key to explain management accounting
change. For example, Ezzamel, et al. (2012) refine our understanding regarding the interplay
between the external and internal pressures to introduce change by exploring tensions that emerged
between the new business logic, prevailing professional logic, and governance logic in the education
field in the UK. Hyvönen, et al. (2012) draw on the concept of institutional entrepreneurship to study
the role of agency in institutional changes at organisational field level in the municipal sector in
Finland. Liguori and Steccolini (2012) explore the idiosyncratic internal elements by explaining why
in the process of accounting change, organisations confronting similar external environmental
pressures show different outcomes of change. Dambrin, et al. (2007) explore the issue of
8
institutionalisation by studying the process by which a change in the institutional logic of an
organisational field diffuses through the management control system of a firm.
Although this recent literature refines our understanding regarding these four elements of the
process of change, these studies tend to concentrate only on one aspect of the process of change. We
understand the contributions and the reasons to adopt this approach due to the interpretive nature of
the explanation of the process of management accounting change based on the pattern model, in
which the researcher seeks theoretical generalisation (Scapens, 1990; 2004). However, in this paper,
we want to challenge this approach by proposing that in order to provide a holistic analysis and
understanding regarding the process of management accounting change and its outcomes in an
organisation, it is necessary to explain and understand the above four elements and how they interact
with each other. In other words, if the aim of a study is to provide a full account and make sense of
the process of management accounting change in an organisation, we argue that the researcher
should draw on the above four elements of change to be able to achieve this objective.
Hopper and Major (2007) is one of the few studies (see also Sharma, et al., 2010) that explain
the four elements of the process of management accounting change in an integrated way (however,
they do not acknowledge explicitly these four elements of change as the key to understand change).
Hopper and Major (2007) provide useful lessons by explaining that institutional and technical
pressures are interwoven and both impact on the process of management accounting change (Cruz,
et al., 2009). In addition, they also stress the importance of studying power struggles and conflicts
at the intra-organisational level. Due to the importance of this study, we initially considered adopting
the Hopper and Major (2007) model as the theoretical framing for this study, however upon
reflection, we decided against it for two main reasons.
First, Hopper and Major (2007) draw extensively on new institutional sociology (NIS), but
it is not explicit on old institutional economics (OIE), as a consequence, they neglected important
concepts, such as lock-in and path-dependence (Ribeiro and Scapens, 2006; Schreyögg and Sydow,
2011). Second, their framework does not deal completely with the issue of the paradox of embedded
agency. Hopper and Major drew on labour process theory to explain the role of agency in the process
of change using the concept of praxis. By adopting this approach they were able to explain how
struggles within production over material issue, autonomy, self-identity and inter-professional
rivalry affected accounting change. However, this view can be considered to be too narrow if you
take into consideration that Seo and Creed (2002) suggest that praxis will be enabled by four sources
of contradictions: inefficiency, nonadaptability, inter-institutional incompatibles, and misaligned
interests.
We argue that these key four elements must be explained in an integrated way, as they are
interrelated and interconnected. As a result, we propose a process model to explain and study
management accounting change in an organisation (see figure 1).
9
Figure 1 – Process Model of Management Accounting Change
Interplay of internal
and external pressures
Idiosyncratic internal
elements
Agency
Institutionalisation
Process
This model depicts that the process of management accounting change is trigged by the
interplay of internal and external pressures for change. These external environmental pressures and
intra-organisational pressures over time will generate institutional contradictions (Seo and Creed,
2002). The accumulation of contradictions may create conflicts among the organisational actors and
generate the conditions for institutional change to take place by enabling agency for introducing
change. The role of agency in the process of change is also shaped by the by the so-called
idiosyncratic internal elements, as the environmental pressures are filtered by organisations through
an internal process (the idiosyncratic internal elements) of interpretation and attribution of meaning.
As a consequence, the idiosyncratic internal elements act as change precipitators and/or mobilisers
(Greenwood and Hinings, 1996). The idiosyncratic internal elements also shape the diffusion and
institutionalisation process of the introduced practice into the organisation (Scapens, 2006).
4 CONCLUDING COMMENTS
Institutional theory provided the lens to achieve our objective. Though the extant literature
on institutional theory provided detailed explanations of the process of management accounting
change, it failed to identify and explain the core elements that are able to provide holistic and
systemic understanding of the process of management accounting change . This observation is
similar to that of Ezzamel, et al. (2012, p. 282), who state that “recent interest in ‘management
accounting change’ has promised a more dynamic frame of reference, though up till now that model
of change has not been clearly defined”. As a consequence, with the endeavour of making sense of
the process of management accounting change in an organisation in a holistic and systematic way,
we revisited the institutional theory contributions on the topic of change, in particular, we based our
study on Scapens (2006) in order to identify the core elements capable of explaining and
understanding management accounting change in an organisation.
We contribute to the literature on management accounting change by consolidating the
institutional understanding that in studying management accounting change, we have to understand
the processes through which management accounting practices change and how they are shaped by
the broad external influences as well as the systematic and more idiosyncratic internal influences
(Scapens, 2006). In doing so, we argue that in order to provide a full explanation of the process of
management accounting change, four elements should be taken into consideration: (1) the interplay
10
of internal and external pressures; (2) the idiosyncratic internal elements of change; (3) agency; and
(4) the process of institutionalisation. We believe that these four elements of change fully summarise
and explain the complexities of management accounting change in an organisation. As a
consequence, we suggest that the theorisation and explanation of management accounting change in
an organisation should inevitably comprise the identification and explanation of these four elements
of change. However, the theorisation and explanation of management accounting change using these
four elements should be undertaken in an integrated manner, as these elements are interconnected
and interrelated.
While it has been acknowledged in the literature that these four key elements are important
in understanding and explaining management accounting change, previous institutional studies have
failed to explicitly consider how they can be integrated into one framework to theorise and explain
management accounting change. To address this situation, we proposed a process model based on
the four elements of change and its interconnections to explain management accounting change in
an organisation. Our proposed process model is offered as a suggested guide by which future
researchers might systematically examine how management accounting practices are shaped by the
intra-organisational and inter-organisational factors involved in the process of change by
emphasising the four elements of change.
Our process model based on the four elements of change is proposed as a ‘skeletal’
framework, that is, a generic model that can provide researchers support to rationalise and explain
the process of change. This ‘skeletal’ framework provides the bones (structure) and future
researchers will insert the ‘flesh’ according to each case to make sense of the process of accounting
change. Therefore, our proposed model is open to other theoretical approaches to make sense and
rationalise the four elements of change.
REFERENCES
Abrahamsson, G. and Gerdin, J., (2006). 'Exploiting institutional contradictions: The role of
management accounting in continuous improvement implementation'. Qualitative Research in
Accounting & Management, 3 (2).
Ax, C. and Bjornenak, T., (2007). 'Management Accounting Innovations: Origins and
Diffusion'. In: Hopper, T., Scapens, R.W. and Northcott, D. (eds). Issues in management accounting.
Harlow: Financial Times Prentice Hall, xxii, 458.
Battilana, J., Leca, B. and Boxenbaum, E., (2009). 'How Actors Change Institutions: Towards a
Theory of Institutional Entrepreneurship'. The Academy of Management Annals, 3 (1):65-67.
Berry, A.J., Coad, A.F., Harris, E.P., Otley, D.T. and Stringer, C., (2009). 'Emerging themes in
management control: A review of recent literature'. The British Accounting Review, 41 (1):2-20.
Burns, J., (2000). 'The dynamics of accounting change Inter-play between new practices,
routines, institutions, power and politics'. Accounting, Auditing & Accountability Journal, 13 (5):325.
Burns, J. and Baldvinsdottir, G., (2005). 'An Institutional Perspective of Accountants' New
Roles - the Interplay of Contradictions and Praxis'. European Accounting Review, 14 (4):725-757.
Burns, J., Ezzamel, M. and Scapens, R.W., (1999). 'Management Accounting Change in the
UK'. Management Accounting, 77 (3):28-30.
Burns, J., Ezzamel, M. and Scapens, R.W., (2003). The challenge of management accounting
change: behavioural and cultural aspects of change management. London: Elsevier.
11
Burns, J. and Nielsen, K., (2006). 'How do Embedded Agents Engage in Institutional Change?'
Journal of Economics Issues, 40 (2):449-456.
Burns, J. and Quinn, M., (2011). 'The routinisation of management controls in software'. Journal
of Management Control, 22 (1):5-24.
Busco, C., (2006). 'Interpreting Management Accounting Systems within Processes of
Organisational Change'. In: Hoque, Z. (ed). Methodological issues in accounting research : theories,
methods and issues. London: Spiramus Press, 223-245.
Busco, C., Quattrone, P. and Riccaboni, A., (2007). 'Management Accounting: Issues in
interpreting its nature and change'. Management Accounting Research, 18 (2):125-149.
Busco, C., Riccaboni, A. and Scapens, R.W., (2006). 'Trust for accounting and accounting for
trust'. Management Accounting Research, 17 (1):11-41.
Busco, C. and Scapens, R.W., (2011). 'Management accounting systems and organisational
culture Interpreting their linkages and processes of change'. Qualitative Research in Accounting &
Management, 8 (4):320-357.
Carruthers, B.G., (1995). 'Accounting, ambiguity, and the new institutionalism'. Accounting,
Organizations and Society, 20 (4):313-328.
Coad, A.F. and Herbert, I.P., (2009). 'Back to the future: New potential for structuration theory
in management accounting research?' Management Accounting Research, 20 (3):177-192.
Dambrin, C., Lambert, C. and Sponem, S., (2007). 'Control and change-Analysing the process
of institutionalisation'. Management Accounting Research, 18 (2):172-208.
Dillard, J.F., Rigsby, J.T. and Goodman, C., (2004). 'The making and remaking of organization
context: Duality and the institutionalization process'. Accounting, Auditing & Accountability
Journal, 17 (4):506-542.
DiMaggio, P., (1988). 'Interest and agency in institutional theory'. In: Zucker, L.G. (ed).
Institutional patterns and organizations. Cambridge, MA: Ballinger, 3-22.
Englund, H. and Gerdin, J., (2011). 'Agency and structure in management accounting research:
Reflections and extensions of Kilfoyle and Richardson'. Critical Perspectives on Accounting, 22
(6):581-592.
Englund, H., Gerdin, J. and Burns, J., (2011). '25 Years of Giddens in accounting research:
Achievements, limitations and the future'. Accounting, Organizations and Society, 36 (8):494-513.
Giddens, A., (1976). New rules of sociological method: a positive critique of interpretative
sociologies. London: Hutchinson.
Giddens, A., (1979). Central problems in social theory: action, structure and contradiction in
social analysis. Basingstoke: Macmillan.
Giddens, A., (1984). The constitution of society. Cambridge: Polity Press.
Greenwood, R., Díaz, A.M., Li, S.X. and Lorente, J.C., (2010). 'The multiplicity of institutional
logics and the heterogeneity of organizational responses'. Organization Science, 21 (2):521-539.
Greenwood, R. and Hinings, C.R., (1996). 'Understanding Radical Organizational Change:
Bringing together the Old and the New Institutionalism'. The Academy of Management Review, 21
(4):1022-1054.
Greenwood, R. and Suddaby, R., (2006). 'Institutional Entrepreneurship in Mature Fields: the
Big Five Accounting Firms'. Academy of Management Review, 49 (1):27-48.
Guerreiro, R., Pereira, C.A. and Frezatti, F., (2006). 'Evaluating Management accounting change
according to the institutional theory approach a case study of a Brazilian Bank'. Journal of
Accounting and Organizational change, 2 (3):196-228.
12
Hardy, C. and Maguire, S., (2008). 'Institutitional Entrepreneurship'. In: Greenwood, R.,
Suddaby, R., Oliver, C. and Sahlin-Anderson, K. (eds). Handbook of Organizational
Institutionalism. New York: Sage, 198-217.
Herbert, I.P. and Seal, W.B., (2012). 'Shared services as a new organisational form: Some
implications for management accounting'. British Accounting Review, 44 (2):83-97.
Hopper, T. and Major, M., (2007). 'Extending Institutional Analysis through Theoretical
Triangulation: Regulation and Activity Based Costing in Portuguese Telecommunications'.
European Accounting Review, 16 (1):59-97.
Hyvönen, T., Järvinen, J., Oulasvirta, L. and Pellinen, J., (2012). 'Contracting out municipal
accounting: the role of institutional entrepreneurship'. Accounting, Auditing & Accountability
Journal, 25 (6):944-963.
Hyvönen, T., Järvinen, J., Pellinen, J. and Rahko, T., (2009). 'Institutional Logics, ICT and
Stability of Management Accounting'. European Accounting Review, 18 (2):241-275.
Innes, J. and Mitchell, F., (1990). 'The Process of Change in Management Accounting: Some
Field Study evidence '. Management Accounting Research, 1 (1):3-19.
Jacobs, K., (2009). 'Beyond commercial in confidence: accounting for power privatisation in
Victoria'. Accounting, Auditing & Accountability Journal, 22 (8):1258-1283.
Jansen, E.P., (2011). 'The effect of leadership style on the information receivers' reaction to
management accounting change'. Management Accounting Research, 22 (2):105-124.
Jarvenpaa, M., (2009). 'The institutional pillars of management accounting function'. Journal of
Accounting & Organizational Change, 5 (4):444 - 471.
Johansson, I.-L. and Baldvinsdottir, G., (2003). 'Accounting for trust: some empirical evidence'.
Management Accounting Research, 14 (3):219-234.
Johansson, T. and Siverbo, S., (2009). 'Why is research on management accounting change not
explicitly evolutionary? Taking the next step in the conceptualisation of management accounting
change'. Management Accounting Research, 20 (2):146-162.
Johnson, H.T. and Kaplan, R.S., (1987). Relevance lost: the rise and fall of management
accounting. Boston, Mass.: Harvard Business School Press.
Kaghan, W. and Lounsbury, M., (2011). 'Institutions and work'. Journal of Management
Inquiry, 20 (1):73-81.
Kholeif, A.O.R., Abdel-Kader, M. and Sherer, M., (2007). 'ERP customization failure:
Institutionalized accounting practices, power relations and market forces'. Journal of Accounting &
Organizational Change, 3 (3).
Lawrence, T.B., Suddaby, R. and Leca, B., (2009). 'Introduction: theorizing and studying
institutional work'. In: Lawrence, T.B., Suddaby, R. and Leca, B. (eds). Institutional work: actors
and agency in institutional studies of organizations. Cambridge: Cambridge University Press, 1-27.
Liguori, M., (2012). 'The Supremacy of the Sequence: Key Elements and Dimensions in the
Process of Change'. Organization Studies, 33 (4):507-539.
Liguori, M. and Steccolini, I., (2012). 'Accounting change: explaining the outcomes,
interpreting the process'. Accounting, Auditing & Accountability Journal, 25 (1):27-70.
Lok, J., (2010). 'Institutional logics as identity projects'. Academy of Management Journal, 53
(6):1305-1335.
Lounsbury, M., (2007). 'A Tale of Two Cities: Competing Logics and Practice Variation in the
Professionalizing of Mutual Funds'. The Academy of Management Journal ARCHIVE, 50 (2):289307.
13
Lounsbury, M., (2008). 'Institutional rationality and practice variation: New directions in the
institutional analysis of practice'. Accounting, Organizations and Society, 33 (4-5):349-361.
Lounsbury, M. and Crumley, E.T., (2007). 'New practice creation: An institutional perspective
on innovation'. Organization Studies, 28 (7):993-1012.
Lukka, K., (2007). 'Management accounting change and stability: Loosely coupled rules and
routines in action'. Management Accounting Research, 18 (1):76-101.
Ma, Y. and Tayles, M., (2009). 'On the emergence of strategic management accounting: An
institutional perspective'. Accounting and Business Research, 39 (5):473-495.
Maguire, S., Hardy, C. and Lawrence, T.B., (2004). 'Institutional entrepreneurship in emerging
fields: HIV/AIDS treatment advocacy in Canada'. Academy of Management Journal, 47 (5):657679.
Marginson, D. and Ogden, S., (2005). 'Managers, budgets and organisational change:
unbundling some of the paradoxes'. Journal of Accounting & Organizational Change, 1 (1):45 - 61.
Meyer, J.W. and Rowan, B., (1977). 'Institutionalized organizations: formal strucutre as myth
and ceremony'. American Journal of Sociology, 83 (2):340-363.
Modell, S. and Wiesel, F., (2008). 'Marketization and performance measurement in Swedish
central government: A comparative institutionalist study'. Abacus, 44 (3):251-283.
Moll, J. and Hoque, Z., (2011). 'Budgeting for legitimacy: The case of an Australian university'.
Accounting, Organizations and Society, In Press, Corrected Proof.
Nor-Aziah, A.K. and Scapens, R.W., (2007). 'Corporatisation and accounting change: The role
of accounting and accountants in a Malaysian public utility'. Management Accounting Research, 18
(2):209-247.
Oliver, C., (1991). 'Strategic Responses to Institutional Processes'. The Academy of Management
Review, 16 (1):145-179.
Pache, A.C. and Santos, F., (2010). 'When worlds collide: The internal dynamics of
organizational responses to conflicting institutional demands'. Academy of Management Review, 35
(3):455-476.
Parker, L.D., (2012). 'Qualitative management accounting research: Assessing deliverables and
relevance'. Critical Perspectives on Accounting, 23 (1):54-70.
Powell, W.W. and DiMaggio, P.J., (1991). The New institutionalism in organizational analysis.
Chicago, Ill. ; London: University of Chicago Press.
Ribeiro, J.A. and Scapens, R.W., (2006). 'Institutional theories in management accounting
change Contributions, issues and paths for development'. Qualitative Research in Accounting and
Management, 3 (2):94-111.
Scapens, R.W., (1990). 'Researching management accounting practice: The role of case study
methods'. The British Accounting Review, 22 (3):259-281.
Scapens, R.W., (2004). 'Doing Case Study Research'. In: Humphrey, C. and Lee, B. (eds). The
real life guide to accounting research : a behind-the-scenes view of using qualitative research
methods. Amsterdam ; Boston: Elsevier, 257-279.
Scapens, R.W., (2006). 'Understanding management accounting practices: A personal journey'.
The British Accounting Review, 38 (1):1-30.
Scapens, R.W. and Bromwich, M., (2010). 'Management Accounting Research: 20 years on'.
Management Accounting Research, 21 (4):278-284.
Scapens, R.W., Ezzamel, M., Burns, J. and Baldvinsdottir, G., (2003). The future direction of
UK management accounting practice. Amsterdam ; London: Elsevier.
14
Schreyögg, G. and Sydow, J., (2011). 'Organizational path dependence: A process view'.
Organization Studies, 32 (3):321-335.
Seal, W., Berry, A. and Cullen, J., (2004). 'Disembedding the supply chain: institutionalized
reflexivity and inter-firm accounting'. Accounting, Organizations and Society, 29 (1):73-92.
Seo, M.-G. and Creed, W.E.D., (2002). 'Institutional Contradictions, Praxis, and Institutional
Change: a Dialectical Perspective'. Academy of Management Review, 27 (2):222-247.
Sharma, U., Lawrence, S. and Lowe, A., (2010). 'Institutional contradiction and management
control innovation: A field study of total quality management practices in a privatized
telecommunication company'. Management Accounting Research, 21 (4):251-264.
Soin, K., Seal, W. and Cullen, J., (2002). 'ABC and organizational change: an institutional
perspective'. Management Accounting Research, 13 (2):249-271.
Steen, M.v.d., (2011). 'The emergence and change of management accounting routines'.
Accounting, Auditing & Accountability Journal, 24 (4):502-547.
Thomas, R., Sargent, L.D. and Hardy, C., (2011). 'Managing organizational change: Negotiating
meaning and power-resistance relations'. Organization Science, 22 (1):22-41.
Tracey, P., Phillips, N. and Jarvis, O., (2011). 'Bridging institutional entrepreneurship and the
creation of new organizational forms: A multilevel model'. Organization Science, 22 (1):60-80.
Tsamenyi, M., Cullen, J. and Gonzales, J.M.G., (2006). 'Changes in accounting and financial
information system in a Spanish electricity company: A new institutional theory analysis'.
Management Accounting Research, 17 (4):409-432.
van Dijk, S., Berends, H., Jelinek, M., Romme, A.G.L. and Weggeman, M., (2011). 'Microinstitutional affordances and strategies of radical innovation'. Organization Studies, 32 (11):14851513.
Wagner, E.L., Moll, J. and Newell, S., (2011). 'Accounting logics, reconfiguration of ERP
systems and the emergence of new accounting practices: A sociomaterial perspective'. Management
Accounting Research, 22 (3):181-197.
Weber, M., (1958). The Protestant ethic and the spirit of capitalism. New York: Scribner.
Weber, M., (1961). General economic history. New York: Collier Books.
Weber, M. and Roth, G., (1968). Economy and society : an outline of interpretive sociology.
New York: Bedminster.
Yazdifar, H., Askarany, D., Askary, S. and Daneshfar, A., (2005). 'Power and Politics and their
Interrelationship with Management Accounting Change'. International Journal of Knowledge,
Culture and Change Management, 5 (5):149-158.
Yazdifar, H. and Tsamenyi, M., (2005). 'Management accounting change and the changing roles
of management accountants: a comparative analysis between dependent and independent
organizations'. Journal of Accounting & Organizational Change, 1 (2):180 - 198.
Yazdifar, H., Zaman, M., Tsamenyi, M. and Askarany, D., (2008). 'Management accounting
change in a subsidiary organisation'. Critical Perspectives on Accounting, 19 (3):404-430.
15